The US Securities and Exchange Commission (SEC) has so far been unsuccessful in its attempts to serve HEX and PulseChain founder Richard Schueler, aka Richard Heart, with his lawsuit over the sale of unregistered securities.
In its latest filing in the U.S. District Court for the Eastern District of New York, the securities regulator said it had requested in August that the Finnish Justice Department transfer the lawsuit to Heart, who lives in Helsinki. However, so far the regulator said it had received “no confirmation of delivery” from the Finnish authorities.
On the same day that the SEC filed an update on its unsuccessful attempts to serve Heart, presiding judge Peggy Kuo decided to postpone a pretrial conference from November 28, 2023 to January 30, 2024 – presumably in the hope that Heart may have been delivered by then and will actually appear.
In July, the SEC charged Heart and three unincorporated companies it controlled, HEX, PulseChain and PulseX, for conducting unregistered offerings of digital securities that raised more than $1 billion from investors.
Heart was known for loudly living out his luxurious “crypto-powered” lifestyle, posting videos of himself with bags full of luxury goods and wearing head-to-toe designer clothes. It’s no surprise that Heart’s deletion of his boastful Instagram profile in March “to show more humility and respect” raised eyebrows and concern among HEX followers.
Heart’s newfound modesty came too late to prevent the SEC from also charging him with fraud and embezzling at least $12 million in investor funds to purchase luxury goods, “including sports cars, watches and a 555-carat black one.” Diamonds called “The Enigma” – reputedly the largest black diamond in the world.”
Heart Ponzis
Heart began marketing HEX as a token on the Ethereum network in 2018, focusing on yield farming. When it launched in December 2019, customers were encouraged to purchase HEX using ETH and stake their HEX as a “blockchain certificate of deposit.” The idea was that they would receive even more HEX in the future, with each HEX hopefully increasing in value by then.
This Ponzi hallmark, the promise of ever-larger rewards for those who locked up their assets for longer periods of time, allowed Heart to attract more investors before it had to pay anything back.
As is often the case with such digital asset scams, CoinGeek was on the alert early on, alerting to suspicious transactions related to HEX back in 2020. Heart dismissed such criticisms, calling the media’s concerns about HEX “stupid.”
Heart followed this profitable Ponzi with another money-making scheme, PulseChain, an Ethereum fork that promises lower transaction fees than Ethereum’s main layer. Between July 2021 and April 2022, investors invested over $354 million in PulseChain and another $676 million in PulseX, a decentralized finance (DeFi) swaps platform.
The SEC alleges that Heart promoted both PulseChain and PulseX as part of a network that would increase the value of HEX. Profits that PulseChain and PulseX make by offering their native tokens PLS and PLSX, respectively, would supposedly flow back into the network and increase the value of all assets.
Unfortunately for Heart, according to the SEC lawsuit, HEX, PLS and PLSX all meet the Howey test for determining whether an asset is a security – and all were offered by Heart without registering or obtaining prior approval from the SEC as required by law.
Follow CoinGeek’s Crypto Crime Cartel series as it delves into the flow of groups – from BitMEX to Binance, Bitcoin.com, Blockstream, ShapeShift, Coinbase, Ripple, Ethereum,
FTX and Tether – which have embraced the digital asset revolution and turned the industry into a minefield for naive (and even experienced) market participants.
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